Analysts attributed commercial banks' high incomes in the first quarter of this year to the government's 4-percent interest subsidy program, which was launched in February and has attracted increasing numbers of borrowers since. Commercial banks have lent more than VND236.8 trillion (US$13.3 billion) to businesses as. of April 17 under the interest subsidy policy, the central bank said on its website.

Saigon Thuong Tin Commercial Joint Stock Bank (STB), the only listed lender on the Ho Chi Minh Stock Exchange, closed at VND23,000 on Friday. It shares have increased 25 percent this year, compared with the VN-Index's rally of 5.9 percent.

The HCMC-based lender, known as Sacombank, announced pre-tax profits of more than VND350 billion in the first three months. Revenue from credit activities accounted for 65 percent of the total income, the bank said on its website on April 10.

As of March 31, the bank, partly owned by ANZ, lent companies VND8.07 trillion at subsidized interest rates.

Sacombank targets pre-tax profits of VND1.6 trillion for 2009. And the lender's CEO Tran Xuan Huy said earlier this month that the bank is likely to surpass the target.

Meanwhile, Asia Commercial Bank (ACB), the only listed lender on the Hanoi Securities Trading Center, has rebounded 42.3 percent this year, compared with the HASTC-Index's rise of 16.6 percent. ACB shares finished last week at VND39,700.

The HCMC-based bank expects its income to reach VND2.7 trillion this year and have already posted a pre-tax profit of more than VND450 billion in the first quarter.

On the OTC market, demand for shares of Vietcombank, Eximbank, and Military Bank have exceeded supply recently, said Nguyen Xuan Cuong, director of OTC center at ACB Securities.

Military Bank shares are now traded at VND18,500, up from VND16,000 a week ago. The Hanoi-based lender's first quarter pre-tax profits increased 70 percent year-on-year to VND408 billion.

Eximbank shares have increased by 30 percent over the past month after the lender said it expected to issue bonus shares at the ratio of 20 percent and pay a dividend of VND1,200 this year. They are now changing hands at VND18,600.

Cuong said about 100,000 Eximbank shares are being traded daily at ACB Securities.

Le Thi Hoa, vice chairwoman of the lender said Friday pretax profits reached VND382 billion in the first quarter, significantly up from VND244 billion in the same period a year earlier.

Duong Cam Da, deputy investment director of Vietnam Equity Holding under Saigon Asset Management Corp. (SAM) said three main factors accounted for the increases in bank share values.

Firstly, leading lenders like ACB, STB, Eximbank, and Techcombank had high earnings in the first three months. Secondly, US financial institutions namely Goldman Sachs and Wells Fargo have announced big Ql profits, revving up the US stock market. And finally, bank share prices have fallen to attractive levels.

But as banks target high credit growth and profit this year, Da warned of bad debts. Investing in bank shares will be good if investors select shares of good banks with low non-performing debt ratios, he said.

Analysts have also warned investors that the surge in bank share prices could be driven by speculators holding on to the shares to wait for higher prices.

Source: Thanhnien News